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China's yuan rebounds on PBOC guidance, but weakness seen lingering

* PBOC fixes midpoint stronger for 4th trading day

* Subtle change of dollar supply/demand in market

* Corporate sentiment towards yuan has soured

* Yuan seen remaining weak at least until mid-May

SHANGHAI, April 28 (Reuters) - China's yuan rebounded against the dollar on Monday after the central bank firmed its official midpoint for the fourth straight trading day, a signal that the monetary authorities may hope to keep the Chinese currency relatively stable for now. But the rebound appeared weak given a subtle change in the state of dollar supply and demand in the domestic market after the yuan has weakened for more than three months in a row, traders said. "Corporate sentiment towards the yuan has turned sour," said a trader at a Chinese commercial bank in Shanghai. "Besides, it appears that capital inflows into China are slowing as well after lingering weakness in the yuan." Spot yuan stood at 6.2483 per dollar at midday, up 0.08 percent from Friday's close after the People's Bank of China set its midpoint at 6.1565, up 0.02 percent from Friday. The gap between the spot rate and the fixing reached as high as 1.5 percent on Monday. That was slightly short of an all-time high of 1.6 percent on Friday, when the yuan also hit a six-month low for the third straight day, at 6.2583. Despite the recent slightly stronger midpoints, traders widely expect the PBOC not to take further action one way or the other in the currency until mid-May, when China publishes foreign trade data for April. However, judging from the current conditions, the PBOC may have to reverse its stance and start supporting the yuan again after driving it down via major state-owned banks earlier this year, traders said. The yuan has depreciated 3.1 percent versus the dollar so far this year after the PBOC guided the currency weaker starting in mid-January, which traders and economists said was a move to deter speculators from betting on a one-way appreciation. The PBOC never said it was deliberately pushing the yuan down, but currency dealers who spoke to Reuters said they suspected the drop was driven primarily by China's "Big Four" state-owned banks, who started buying up dollars in the domestic foreign exchange market at the central bank's behest. But the central bank has more recently no longer intervened to depress the yuan. In a few cases, state banks have been seen even selling dollars to support the yuan's value in recent weeks, traders said.

The onshore spot yuan market at a glance:

Item Current Previous Change (pct) PBOC midpoint 6.1565 6.1576 0.02 Spot yuan 6.2483 6.2336 0.08

Divergence from midpoint* 1.49 (pct)

Spot change ytd -3.11 Spot change since 2005 32.46

revaluation

*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 1 percent from official midpoint rate it sets each morning.

The offshore yuan market at a glance:

Instrument Current Difference

from onshore (pct)

Offshore spot yuan 6.2538 -0.09 Offshore non-deliverable 6.2610 -1.67

forwards

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> RECENT DEVELOPMENTS - US warns China over currency depreciation - Capital flows, improving trade to prop up yuan in H2 - Dim sum bonds mark record quarter in Hong Kong

- New quotas rekindle debate over dim sum market's future

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KEY DATA POINTS - Yuan spot performance versus midpoint after trading band widened http://link.reuters.com/jyz38v - China's yuan, other emerging mkt currencies vs dollar http://link.reuters.com/xyd46v - Global currency performance INTERACTIVE GRAPHIC: http://link.reuters.com/cyx46v - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t

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(Editing by Chris Gallagher)